With the price of Indian basket of crude oil falling below $100 a barrel, the government is under tremendous pressure to cut the consumer price of petrol, diesel and cooking gas. India?s crude oil import price has dropped to below $100 a barrel for the first time since April and averaged $99 a barrel on Tuesday, the lowest level since April 2. It had averaged $96.52 a barrel on April 1 and crossed the $100 mark on April 7.
?The Indian basket of crude oil is lower than the $119-120 level at which the June 4 price hike was announced. But even at current levels, the companies are still losing money on sale of petrol, diesel, LPG and kerosene,? a petroleum ministry official said.
However, officials agree that if the price of crude oil sustains below $100 a barrel mark for the next one month, the government may have to go in for a fuel price cut despite opposition from the state-owned oil marketing firms?Indian Oil, BPCL and HPCL, who are still losing money on fuel sales. With an eye of general elections, the government is likely to announce the cut close to Diwali.
The cabinet will meet in October to review the global crude oil price scenario and its impact on domestic fuel prices. The last hike in the prices of petrol, diesel and LPG, in June this year, was the highest so far, when petrol became dearer by Rs 5/lt, diesel by Rs 3/lt and LPG by Rs 50 a cylinder.
However, oil companies say that any such move may prove to be ?detrimental? to their interests. ?We had a bad Q1 and with the lowering of refining margins (due to fall in crude oil prices), the Q2 is going to be bad again. The pressure on financials has already resulted in cash shortages.
Any such move by the government will have a strong impact on the oil companies and should be avoided,? said an oil company official. There is no denying the fact that continued cash losses are making the operations of oil PSUs unviable besides sapping the ability of the navratana oil PSUs to generate internal resources for future investments. The tight liquidity position of the oil marketing companies is causing constraints in their day-to-day operations and making it difficult for them to even make timely payments for purchasing of crude oil.
Therefore, a cut in petrol and diesel prices may not be economically feasible as the OMCs are projected to lose Rs 1,65,300 crore on fuel sales this fiscal.Retailers are at present losing Rs 6.31 per litre on petrol, Rs 13.69 on diesel, Rs 31.39 on kerosene and Rs 312.58 per 14.2-kg LPG cylinder. IOC, BPCL and HPCL together are losing about Rs 400 crore per day on fuel sales.
The revenue loss of retailers has to be compensated through a combination of oil bonds and assistance from upstream firms like ONGC. IOC, the company that controls about 54 % of the market, is projected to lose Rs 90,630 crore on fuel salesthis fiscal. The firm loses Rs 11 crore per day on sale of petrol, Rs 112 crore daily on sale of diesel, Rs 63 crore per day on kerosene and Rs 32 crore per day on LPG.